April 2009 Archive for Economic Sense

Last week there were many activities going on across the country having to do with Earth Day. Every year I cringe wondering where Agriculture will show up in the spotlight. One thing that I have noticed however, is that the more we add modern technology and science based production techniques to the equation, we get more of the scrutiny. This is despite the fact that modern agriculture is just as sustainable and in some cases may be even more ‘earth’ friendly- as in the case of biotech crops- than techniques centered on more nostalgic preferences.

Typically, those producing in local or organic markets are able to avoid a lot of the scrutiny, and often are able to find themselves in the center of attention for sustainable and environmentally friendly practices. My opinion of that is let the market decide. Regardless of what the research says, if consumers have a need for these food systems and we have producers willing to fill it, then who is harmed? As long as government stay s out, and we don’t get regulatory constraints that favor one form of production over another, the market will lead us to the solution most consistent with environmental sustainability.

One thing about growing up on a farm, or making a living at it, is that you quickly understand some very basic concepts in economics, such as scarcity, tradeoffs, and opportunity costs. These concepts are the foundation for a proper understanding of economic theory. You easily recognize that time, money, land, labor, and equipment are limited. You can only plant so many acres in a certain period of time. There are tradeoffs between planting once crop vs another, and there are opportunity costs to routine but necessary chores like scouting your wheat ( or paying someone to do it). Just as there are costs to every decision made every day of the season, there are also benefits. We weigh these benefits and costs and make the best decision we can given the limited amount of information we have (another scarce resource). It is a very simple (to some it even comes subconsciously or instinctively- called experience) yet at the same time very complicated process.

Ultimately, acting in our own self interest, guided by prices, the market leads producers to decisions that benefit themselves as well as the environment. This may explain the massive adoption of modern day ‘green’ technologies such as herbicide resistant and insect tolerant crops all over the world. The benefits they provide producers outweigh the extra costs, and as a side benefit, these products are also better for the environment than methods of the past.

This scenario may best be described as ‘the invisible green hand.’ A well researched article from the Mercatus Center at George Mason University supports the following thesis:

“independent businesses and entrepreneurs, acting in their own economic self-interest within an institutionalcontext that encourages innovation, are inherently inclined towards green practices.”

We’ve certainly seen this in Agriculture, and I hope that this theme finds its way into future Earth Day Celebrations.